88R7616 JCG/KBB-F
 
  By: Bonnen H.B. No. 3495
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to the investment authority of certain state agencies and
  the confidentiality of certain information related to those
  investments.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 404.024, Government Code, is amended by
  amending Subsections (b) and (c) and adding Subsections (c-1) and
  (c-2) to read as follows:
         (b)  Subject to Chapter 2270, state funds not deposited in
  state depositories shall be invested by the comptroller in:
               (1)  direct security repurchase agreements;
               (2)  reverse security repurchase agreements;
               (3)  direct obligations of or obligations the principal
  and interest of which are guaranteed by the United States;
               (4)  direct obligations of or obligations guaranteed by
  agencies or instrumentalities of the United States government;
               (5)  bankers' acceptances that:
                     (A)  are eligible for purchase by the Federal
  Reserve System;
                     (B)  do not exceed 270 days to maturity; and
                     (C)  are issued by a bank whose other comparable
  short-term obligations are rated in the highest short-term rating
  category, within which there may be subcategories or gradations
  indicating relative standing, including such subcategories or
  gradations as "rating category" or "rated," by a nationally
  recognized statistical rating organization, as defined by 15 U.S.C.
  Section 78c;
               (6)  commercial paper that:
                     (A)  does not exceed 365 [270] days to maturity;
  and
                     (B)  except as provided by Subsection (i), is
  issued by an entity whose other comparable short-term obligations
  are rated in the highest short-term rating category by a nationally
  recognized statistical rating organization;
               (7)  contracts written by the treasury in which the
  treasury grants the purchaser the right to purchase securities in
  the treasury's marketable securities portfolio at a specified price
  over a specified period and for which the treasury is paid a fee and
  specifically prohibits naked-option or uncovered option trading;
               (8)  direct obligations of or obligations guaranteed by
  the Inter-American Development Bank, the International Bank for
  Reconstruction and Development (the World Bank), the African
  Development Bank, the Asian Development Bank, and the International
  Finance Corporation that have received the highest long-term rating
  categories for debt obligations by a nationally recognized
  statistical rating organization;
               (9)  bonds issued, assumed, or guaranteed by the State
  of Israel;
               (10)  obligations of a state or an agency, county,
  city, or other political subdivision of a state;
               (11)  mutual funds secured by obligations that are
  described by Subdivisions (1) through (6) or by obligations
  consistent with Rule 2a-7 (17 C.F.R. Section 270.2a-7), promulgated
  by the Securities and Exchange Commission, including pooled funds:
                     (A)  established by the Texas Treasury
  Safekeeping Trust Company;
                     (B)  operated like a mutual fund; and
                     (C)  with portfolios consisting only of
  dollar-denominated securities;
               (12)  foreign currency for the sole purpose of
  facilitating investment by state agencies that have the authority
  to invest in foreign securities;
               (13)  asset-backed securities, as defined by the
  Securities and Exchange Commission in Rule 2a-7 (17 C.F.R. Section
  270.2a-7), that are rated at least A or its equivalent by a
  nationally recognized statistical rating organization and that
  have a weighted-average maturity of five years or less; and
               (14)  corporate debt obligations that are rated at
  least A or its equivalent by a nationally recognized statistical
  rating organization and mature in five years or less from the date
  on which the obligations were "acquired," as defined by the
  Securities and Exchange Commission in Rule 2a-7 (17 C.F.R. Section
  270.2a-7).
         (c)  Investments in direct security repurchase agreements
  and reverse security repurchase agreements may be:
               (1)  placed through [made with] state or national banks
  doing business in this state or with primary dealers as approved by
  the Federal Reserve System; or
               (2)  made directly with a state agency with the
  authority to invest in repurchase agreements.
         (c-1)  For purposes of Subsection (c), "state agency" means:
               (1)  an office, department, commission, board, or
  agency that is part of any branch of state government;
               (2)  an institution of higher education as defined by
  Section 61.003, Education Code; or
               (3)  a nonprofit corporation acting on behalf of an
  entity described by Subdivision (1) or (2).
         (c-2)  Notwithstanding any other law, the term of any reverse
  security repurchase agreement made by the comptroller may not
  exceed 90 days after the date the reverse security repurchase
  agreement is delivered. Money received by the comptroller under
  the terms of a reverse security repurchase agreement may be used to
  acquire additional authorized investments, but the term of the
  authorized investments acquired must mature not later than the
  expiration date stated in the reverse security repurchase
  agreement.
         SECTION 2.  Section 825.103(d), Government Code, is amended
  to read as follows:
         (d)  Notwithstanding any other law, the retirement system
  has exclusive authority over the purchase of goods and services
  using money other than money appropriated from the general revenue
  fund, including specifically money from trusts under the
  administration of the retirement system, and Subtitles [Subtitle] D
  and F, Title 10, do [does] not apply to the retirement system with
  respect to that money. The retirement system shall acquire goods or
  services by procurement methods approved by the board of trustees
  or the board's designee. For purposes of this subsection, goods and
  services include all professional and consulting services and
  utilities as well as supplies, materials, equipment, skilled or
  unskilled labor, and insurance. The comptroller shall procure
  goods or services for the retirement system at the request of the
  retirement system, and the retirement system may use the services
  of the comptroller in procuring goods or services.
         SECTION 3.  Section 825.301(a), Government Code, is amended
  to read as follows:
         (a)  The board of trustees shall invest and reinvest assets
  of the retirement system without distinction as to their source in
  accordance with Section 67, Article XVI, Texas Constitution. For
  purposes of the investment authority of the board of trustees under
  Section 67, Article XVI, Texas Constitution, "securities" includes
  any investment instrument within the meaning of the term as defined
  by Section 4001.068, 15 U.S.C. Section 77b(a)(1), or 15 U.S.C.
  Section 78c(a)(10), any derivative instrument, and any other
  instrument commonly used by institutional investors to manage
  institutional investment portfolios. An interest in a limited
  partnership or investment contract is considered a security without
  regard to the number of investors or the control, access to
  information, or rights granted to or retained by the retirement
  system. Any instrument or contract intended to manage transaction
  or currency exchange risk in purchasing, selling, or holding
  securities is considered to be a security. Subject to Section
  825.3013, an interest in a title-holding entity is considered a
  security. Investment decisions are subject to the standard provided
  in the Texas Trust Code by Section 117.004(b), Property Code.
         SECTION 4.  Section 825.3012(b), Government Code, is amended
  to read as follows:
         (b)  Notwithstanding any provision of Section 825.301, the
  board of trustees shall determine the maximum percentage [not more
  than 10 percent] of the value of the total investment portfolio of
  the retirement system that may be invested in hedge funds.
         SECTION 5.  Subchapter D, Chapter 825, Government Code, is
  amended by adding Sections 825.3013 and 825.3014 to read as
  follows:
         Sec. 825.3013.  TITLE-HOLDING ENTITIES; INVESTMENTS IN REAL
  PROPERTY.  (a)  The retirement system may form a title-holding
  entity for the purpose of investing the retirement system's assets
  in real property. The title-holding entity must be:
               (1)  wholly owned and controlled by the system; and
               (2)  exempt from taxation under Section 501(a),
  Internal Revenue Code of 1986, as an organization described by
  Section 501(c) of that code.
         (b)  Subject to Subsection (a)(2), a title-holding entity
  formed under this section may hold title to real property jointly
  with another person. 
         (c)  The board of trustees shall adopt policies for the
  governance, management, and reporting for a title-holding entity
  formed under this section. 
         (d)  The following persons may not be employed by, receive
  compensation from, be a party to a contract with or a direct or
  indirect financial beneficiary of a contract with, or hold a direct
  or indirect interest in a title-holding entity formed by the
  retirement system under this section:
               (1)  a trustee or employee of the system; or
               (2)  a relative of a trustee or employee of the system
  within the second degree of consanguinity or affinity, as
  determined under Chapter 573. 
         (e)  Chapter 551 and Subtitles D and F, Title 10, do not apply
  to a title-holding entity formed under this section.
         Sec. 825.3014.  CONFIDENTIALITY OF RECORDS RELATED TO
  TITLE-HOLDING ENTITIES.  (a)  Notwithstanding any other law other
  than this section, all information that relates to a title-holding
  entity formed under Section 825.3013 is confidential and excepted
  from disclosure under Section 552.021, including information
  relating to:
               (1)  a pre-due diligence or post-due diligence review,
  audit, or investigation; 
               (2)  the formation of a title-holding entity under
  Section 825.3013; or
               (3)  a potential purchase of real property by a
  title-holding entity, regardless of whether the purchase is
  completed. 
         (b)  The following information as it relates to a
  title-holding entity formed under Section 825.3013 is public
  information under Chapter 552: 
               (1)  the title-holding entity's certificate of
  formation or comparable instrument issued by a foreign
  jurisdiction; 
               (2)  the date or dates on which the title-holding
  entity purchased or sold an interest in real property; 
               (3)  information relating to the title-holding entity's
  qualification for the federal income tax exemption required under
  Section 825.3013(a)(2); 
               (4)  the name and location, including the physical
  address, city, state, and country, of any real property in which the
  title-holding entity has an interest; 
               (5)  as shown in the meeting minutes of the board of
  trustees, each recusal by a member of the board in connection with a
  deliberation or action relating to the title-holding entity, any
  real property in which the entity has an ownership interest, or a
  lease or contract with the title-holding entity; 
               (6)  the name of each employer or business entity owned
  wholly or partly by the relative of a member of the board of
  trustees or a retirement system employee, within the second degree
  of consanguinity or affinity under Chapter 573, that is a
  prospective party to a transaction or contract with the
  title-holding entity, including a contract that is: 
                     (A)  a real property purchase and sale agreement;
                     (B)  for goods or services; or
                     (C)  a lease agreement, including a ground lease
  agreement;
               (7)  the name of the business entity or employer
  described by Subdivision (6) as stated in the business entity's or
  employer's certificate of formation or comparable instrument; 
               (8)  copies of income tax returns filed by the
  title-holding entity, except information in the returns relating to
  indebtedness, tax basis, and gains or losses realized on the sale or
  other disposition of real property by the title-holding entity;
               (9)  if the system or a state agency is a tenant of real
  property owned by the title-holding entity: 
                     (A)  the name of that tenant;
                     (B)  the name and address of the property; and
                     (C)  the financial returns to the system from
  investing in the property; and
               (10)  if applicable, the name of any joint owner of real
  property a title-holding entity has an ownership interest in and
  the percentage of the property owned by a joint owner.
         (c)  Except as provided by this subsection, this section
  applies to information regardless of whether the title-holding
  entity disposes of the entity's interest in real property or an
  asset if the information is inextricably intertwined with another
  interest in real property or other assets owned by the
  title-holding entity.  The final sale documentation of the disposed
  real property or other asset is public information under Chapter
  552. 
         (d)  This section does not prohibit the retirement system or
  any person from asserting that any information described by this
  section is confidential or exempt from disclosure under Section
  552.021 or other law.  Notwithstanding any other law, if the
  retirement system discloses information described by Subsection
  (a) to a person, the disclosure does not:
               (1)  waive or affect the confidentiality of information
  relating to any other title-holding entity; or
               (2)  waive the retirement system's right to assert
  exceptions to disclosure of the information in the future.
         SECTION 6.  Section 2270.0004, Government Code, is amended
  to read as follows:
         Sec. 2270.0004.  INAPPLICABILITY OF CERTAIN REQUIREMENTS
  INCONSISTENT WITH OTHER LAW OR FIDUCIARY RESPONSIBILITIES AND
  RELATED DUTIES. An investing entity described by Section
  2270.0001(7)(B) or (C) is not subject to a requirement of this
  chapter:
               (1)  if applicable, to the extent prescribed by Section
  825.103(d); or
               (2)  if the entity determines that the requirement
  would be inconsistent with the entity's fiduciary responsibility
  with respect to the investment of entity assets or other duties
  imposed by law relating to the investment of entity assets,
  including the duty of care established under Section 67, Article
  XVI, Texas Constitution.
         SECTION 7.  This Act takes effect immediately if it receives
  a vote of two-thirds of all the members elected to each house, as
  provided by Section 39, Article III, Texas Constitution.  If this
  Act does not receive the vote necessary for immediate effect, this
  Act takes effect September 1, 2023.